Indonesia's Investment Grade Safe, but Growth Risks Loom

PT Mirae Asset Sekuritas Indonesia views S&P Global Ratings’ decision to maintain Indonesia’s credit rating at BBB with a stable outlook as a positive signal for the market. However, investors are advised to remain cautious of various macroeconomic challenges that continue to cloud the nation’s economic growth prospects for the second half of 2026.

Head of Research and Chief Economist at PT Mirae Asset Sekuritas Indonesia, Rully Arya Wisnubroto, stated that the S&P decision indicates Indonesia’s fiscal fundamentals remain relatively intact, particularly with the retention of the state budget deficit limit of 3 percent of GDP as a fiscal policy anchor. "The reaffirmation of the investment grade rating by S&P provides confidence that Indonesia’s fundamental conditions are still quite strong. However, investors also need to see that future challenges stem not only from fiscal conditions but also from external pressures and a slowdown in domestic demand," Rully said.

According to Rully, unlike S&P which maintained a stable outlook, Fitch Ratings and Moody’s still hold a negative outlook on Indonesia, assessing that policy uncertainty and risks to the fiscal and external sectors remain high. Nevertheless, Mirae Asset views the main risk currently not as a credit rating downgrade, but rather an economic growth slowdown amidst ongoing external pressures. "We see S&P’s projection of economic growth rising above 6 percent in the coming years as still quite optimistic. Aggressive interest rate hikes, Rupiah depreciation, higher inflation, and slowing domestic demand could potentially limit the pace of economic growth," Rully said.

Rully added that the government’s room to provide fiscal stimulus is expected to remain limited due to the commitment to keep the budget deficit below 3 percent of GDP. Under these conditions, Mirae Asset continues to prioritise a defensive investment strategy by selecting issuers with strong fundamentals, healthy liquidity, and the ability to maintain profitability amid market volatility. "We still see BBCA, EXCL, and JPFA as top picks because they have relatively strong fundamentals to face market uncertainty," Rully stated.

Meanwhile, Fixed Income Analyst at PT Mirae Asset Sekuritas Indonesia, Jessica Tasijawa, said pressure on global financial markets is also influenced by rising geopolitical risks in the Middle East. According to Jessica, the increase in Brent crude oil prices to around USD83 per barrel could potentially raise Indonesia’s energy import costs, widen the current account deficit, and maintain pressure on the Rupiah exchange rate. "On the other hand, rising oil prices also increase global inflation risks, thereby reinforcing expectations of higher for longer interest rates. This condition could sustain global financial market volatility for some time to come," Jessica said.

Despite this, Jessica assessed that the reaffirmation of Indonesia’s investment grade status by S&P remains a positive factor that could support foreign investor interest in Government Securities (SBN), particularly short to medium tenors, as long as geopolitical conditions do not deteriorate significantly.